Power Sharing with My Old Friends

By Fang Jue

October 26, 2007

When the Seventeenth Party Congress ended on October 22, two new faces emerged on the standing committee of the political bureau of the Communist Party of China, China’s highest level of leadership.

I am a democracy activist who was jailed by the Communist Party of China. Nevertheless, the two new members of the standing committee of the political bureau are my old friends. This may be interesting.

Six months ago, I published an article in the Hong Kong based magazine The Trend suggesting that the highest leadership in China should include these two men: one is Xi Jinping, who was the Party secretary of Shanghai which, as New York City is to the USA, is China’s biggest commercial city. The other is Li Keqiang, who was the Party secretary of Liaoning Province, an important industrial area in China.

In May, a representative from communist China visited me to seek my opinion on the upcoming Seventeenth Party Congress even though I am a dissident against the Party. I advocated again that the highest leadership in China ought to include Xi Jinping and Li Keqiang, both born in the 1950s. It would appear to be crazy that a member of the political opposition would support two party members joining the highest leadership. But Comrade Xi Jinping was my close colleague in the local authority in Fujian Province in the early 1990s. For more than twenty-five years his intention has been to institute economic reform and an open-door policy. And Comrade Li Keqiang was my close schoolmate when we studied at Beijing University, the most famous university in China, from the late 1970s to the early 1980s. He and I determined to push for reform in China, and we maintained a political friendship for a long time.

In spring 2004, I suggested that the American government engage with Mr. Xi Jinping and Mr. Li Keqiang who were then at the next highest level of leadership in China. It was encouraging that the secretary of the U.S. Department of the Treasury, Henry M. Paulson, Jr., met Mr. Xi Jinping last September during his visit to China, representing the American president as special envoy. Of course, I hoped that the American government would also engage with Mr. Li Keqiang.

Comrade Xi Jinping may become China’s paramount leader as the general secretary of the Party and Comrade Li Keqiang may become the premier of China’s government when the Eighteenth Party Congress is held in 2012. Does this mean a good political future for me?

It is not enough to assure China’s democratic transformation.

Any democratic transformation in communist nations is not only dependent on a few reformers among the Party’s highest leadership. For China, real democratic transformation must have two steps.

The first step is to choose some politicians who are not “communist comrades” as ministers in the central government and governors in the provinces.

The second step is to open the door to allow multi-party political competition in free elections for governmental leaders and members of parliament. In other words, democratic transformation means power sharing with the communist party.

Therefore, my hope is that Comrade Xi Jinping and Comrade Li Keqiang will support China’s democratic transformation when the rigid president Hu Jintao retires as the head of the current highest leadership in five years.

Power sharing with my old friends in China’s democratic process is my favorite vision of the future.

(The author, Fang Jue, is a Chinese political activist living in the United States. fangjue2005@hotmail.com)

The truth behind China's Party Congress elections

PAUL LIN

TAIPEI, Oct. 25

The Chinese Communist Party announced with some fanfare that it would hold "contested elections" for the Central Party Committee members at its 17th National Congress. In fact, the list of nominees was presented by Zeng Qinghong, secretary-general of the Congress, to a meeting of its presiding committee on the afternoon of Oct. 17, according to Xinhua, the official news agency.

The CCP has not had very pleasant experiences with contested elections in the past. Deng Liqun, called the "king of the leftists," was unexpectedly eliminated from the Central Party Committee at the 13th Party Congress in 1987. As a consequence, this type of election was abandoned at the 14th Congress, after the Tiananmen crackdown on June 4, 1989. At the 16th Congress of 2002, contested elections were resumed, as an indication that progress was being made toward "socialist democracy" and "intra-Party democracy."

Now President Hu Jintao is stressing the need to further develop intra-Party democracy. Thus, before the Congress it was announced that the number of nominees this time would be 10-15 percent higher than the number of seats, increasing the number to be eliminated. At the last Congress, only 5 percent of those on the list had to be eliminated. However it is said there was some dispute over this within the innermost circles. (Editor's note: In fact, the CCP announced after the 17th Congress that there were 8 percent "extra" candidates on the nominee list.)

Half of the Central Party Committee members are new faces this time. There were also a lot of new delegates to the Congress this time, as well as some old faces. The new faces are those who obtained benefits because of Hu and have become part of his "interest group". Certainly they will support Hu and reject the vested interests of the old guard. So from now on whenever there is voting, Hu will probably win. This is the No. 1 strategy for the young generation of leaders to defeat the old vested interests by voting in the Congress or the Central Committee. Hu surely understood this.

Under such circumstances, the greater the difference between the number of seats and the number of nominees, the higher the chance that old faces would be eliminated from the Central Committee. Those to be eliminated would be all the famous figures. Intra-Party democracy does not allow candidates to campaign, so delegates are only familiar with those from their own province or department, and with those who hold high positions. Therefore, they would not eliminate unknown names. The delegates would just strike out the celebrities they dislike -- the Youth League faction would eliminate the Shanghai Gang and vice versa. Thus Hu might win the advantage.

However, no matter how high the discrepancy between seats and winners in the contested election, the name list was provided by the top authorities anyway. No one not on the list could be elected. Still, in order to avoid losing control, the authorities decided to have a "preliminary election" to find out who might be eliminated. The result might have been more interesting if the delegates had done what voters in Taiwan did -- refusing to comment or giving an opinion opposite their real one to pollsters before elections.

According to media reports from Hong Kong and Japan, the names of Zeng Qinghong, Wu Guanzheng and Luo Gan were not on the suggested name list, making it clear that they would not remain on the Politburo's Standing Committee. It is worth mentioning that Zeng proved his political intelligence by not asking to be reappointed -- it's enough that he has people on the committee to speak for him, so why bother to be reelected and then be criticized?

The names of Jia Qinglin and Li Changchun were on the list, which means they wanted to remain in office. If they had been eliminated in the election for the Central Party Committee, like the surprise that came to Deng Liqun, they would have been really humiliated. Jia Qinglin is a great representative of money politics and corruption in the CCP and an accomplice of smuggler Lai Changxing. Nevertheless, Jia was reappointed. This leads one to conclude that Hu Jintao's anti-corruption campaign should be thrown into the trash bin.

There is no way to confirm whether or not there was a contested election for the Politburo or its Standing Committee. Possibly not, or it would have been more interesting. That would have been a real battle of power between Hu Jintao and Jiang Zemin.

The CCP would never reveal the number of ballots cast for the members of the Central Committee, because it might embarrass those who won fewer ballots. It might also embarrass the Party, for those who won the least ballots might turn out to be exactly those chosen for the Politburo and the Standing Committee.

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(Paul Lin is a well-known commentator on politics and an expert on Chinese Communist Party history. He is a former editor whose columns have appeared in major newspapers in the United States, Hong Kong and Taiwan. This article is translated and edited from the Chinese by UPI Asia Online; the original can be found at www.ncn.org. ©Copyright Paul Lin.)

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Bao Tong on the 17th Party Congress

2007.10.24

Bao Tong gives a rare television interview. Photo:AFP

A former top official in China’s ruling Communist Party has launched a stinging attack on his former colleagues as a key political meeting winds down in the capital. Bao Tong, former aide to ousted late premier Zhao Ziyang, was scathing about the 17th Party Congress. He wrote this essay, broadcast by RFA’s Mandarin service, from his Beijing home, where he has lived under house arrest since his release from jail in the wake of the 1989 student movement:

No sooner was the 17th Congress of the Communist Party of China over, than people were talking about it going down in the annals of history. Surely this is a little premature?

Perhaps if the new people that this Congress has voted into office are heroic, without equal, they will truly manage to inscribe themselves into the history books with deeds that move Heaven and Earth. Naturally, if this dream were truly attainable, then that would be an occasion for congratulations and admiration. But this isn’t the case, and there is no place for this dream in a realistic forecast, nor does it have any basis in what is really happening.

Shadow of the Party

The writers of the 17th Party Congress documents...are trying to scratch an itch from outside of their boots. In doing so, they have achieved a new level of rhetoric, which is an accomplished blend of the old blah and the newspeak.

Bao Tong

When it comes to the documents of the 17th Party Congress, I don’t value them very highly, because they don’t address the real difficulties that beset ordinary Chinese people and even the highest level of leadership.

They don’t address exactly how the social differences between rich and poor came about. They don’t tell us how, while China’s economy was busy throwing off the yoke of Maoism and attracting world attention with its rapid and continual development, how suddenly millions of billionaires were created, while the people whose labor had made all of this possible were stuck in the mire of poverty with no means of escape. Why the meager wages of the workers and the peasants made them unable to exercise their purchasing and investing power in the marketplace, nor why no decent domestic market exists, nor why a country of 1.4 billion people thinks it can’t breathe without the air of foreign sales or foreign investment.

Now, the Party that supposedly represents those workers and peasants has been in power for more than half a century. So how is it that the workers and the peasants who are named in the Constitution as “the basis of the country” have nothing left to depend on, turned into a voiceless group of colonized weaklings, who are routinely bullied and humiliated by those with power and money?

How is it that it is impossible to get rich by working hard or by running a legal business? How come power and money have replaced free competition in almost every major transaction, to the extent that it is now so commonplace that has become a typical phenomenon which is repeats itself millions of times over?

Nothing to fear for Party

As officials and businesses collude in the drive to make massive profits, the environment is increasingly degraded and natural resources are being spoiled. Where are future generations going to live? Why is it that we, a nation of 1.4 billion citizens, are simply clinging on, trying to delay the catastrophe? Why is each and every one of us incapable of grasping our own power?

Why is it that the crucial roles played by the media and the creative arts, that of exposing the dark side of our society, are now regarded as the epitome of treason, and are being choked off, one by one? Why has the publications inspection system which caused Marx such a headache been turned by Communist Party leaders into the art of maintaining power?

These and so many other similar questions are studiously avoided by the documents of the 17th Party Congress. They aren’t raised, they aren’t analyzed, and they aren’t answered. The documents don’t answer the question of how to turn this country into a genuine republic, not just in name only; neither do they address the question of how to ensure that ordinary citizens genuinely have the right to exercise state power.

Neither, of course, do they address how the problem of relations across the Taiwan Straits might be addressed from a firm basis of peace and democracy, or the question of how China might become a responsible and trustworthy member of the international community.

It is my opinion that there is nothing to be feared for a political party willingly to give up dictatorship, because such a move will inevitably result in new life through death, with immeasurable prospects for the future.

Bao Tong

All of these problems have beset the writers of the 17th Party Congress documents, who are trying to scratch an itch from outside of their boots. In doing so, they have achieved a new level of rhetoric, which is an accomplished blend of the old blah and the newspeak. To do this, they have had to come up with a whole new brand of political language—let’s call it an international expo with Chinese characteristics. Its kitsch new nouns each have their place—“such magnificence! Such virtue and beauty!”

The 17th Party Congress passed a resolution to say that it was very happy with all these documents, which they say make clear which flag they are flying and which road they are taking. Perhaps they really are flying a banner with Chinese characteristics. Perhaps they really are walking such a road. Perhaps it is a mutable, obscure banner, and an uncertain road. Perhaps small adjustments have to be made along the way if the ultimate goal is to be attained.

Either way, it is no more than a euphemism for the Party’s unwavering aim: and that is to assure its continuing hold on power.

Mao Zedong’s insight, that continual revolution was necessary, was an excellent one [in the context of maintaining total power]. Because any political system in which power is monopolized is by definition an illegal one.

Neither do I believe in the any of that mumbo-jumbo about banners and roads. Why should we let the wool be pulled over our eyes?

To date, China has held high the banner of Marxist-Leninist Thought, of Mao Zedong Thought, of Deng Xiaoping, and of the Three Represents. All this banner-holding has left us with is a huge pile of unsolvable problems.

No wonder they have had to come up with a new banner, and will have to come up with a good few more in the future. Will they suffer a reversal of fate? I daren’t believe it.

It is my opinion that there is nothing to be feared for a political party willingly to give up dictatorship, because such a move will inevitably result in new life through death, with immeasurable prospects for the future.

From the point of view of a republic, it shouldn’t allow a single party to monopolize power, to look after the people, to hold up banners in their name, or to walk its citizens’ roads for them.

It is far more important that each individual citizen should exercise their own right within the framework of the law to say what they need to say, and to do what they need to do. The citizen is king.

With 1.4 billion thinking, acting citizens, all with the power to root out problems in the system within the law, what problem could remain unsolved?

Written by Bao Tong for RFA's Mandarin service. Service director: Jennifer Chou. Translation by Luisetta Mudie. Edited by Sarah Jackson-Han.

China's long march toward collective leadership

GUAN JIAN

BEIJING, Oct. 22

The political report presented by President Hu Jintao to the Chinese Communist Party's 17th Congress received an embarrassing amount of admiration from CCP leaders, whose duty was to examine and discuss that report, not to praise it.

This report included all aspects of the work done since the 16th Party Congress and outlined the Party's future work. This means that proposing and determining the major political policies was done by the 17th Congress in name only. In fact it was done by the 16th Central Committee. So why did more than 2,000 delegates come to the Congress?

Jia Qinglin, a member of the Standing Committee of the 16th Central Committee, told the Beijing delegation to seriously study and put into practice Hu's report. As for their duty to "examine and discuss the report," this is just a superficial slogan. The most a delegate could do was to suggest a slight modification of the report. It was impossible for any of them to give a unique political perspective. The real job of the delegates was to study and practice the spirit of the Central Committee, which has been made up to be the spirit of the 17th Party Congress.

This is certainly not a strange thing. It follows under the practical rule that the whole Party and the Party Congress are subordinate to the Central Committee.

The necessity for intraParty democracy, advocated by Hu, lies in the fact that there are different voices, different political ideas, perspectives and claims within the Party. There are various candidates for Party posts, surrounded by diverse supporters. Since there are different voices, intraParty democracy is supposed to allow debates and discussions. Since there are different candidates, it is supposed to mean elections. Generally, elections should be contested -- single-candidate elections are only for very special situations. The CCP, however, has the ability to make "very special situations" into "very normal" things.

At present, the CCP seems not to need democracy within the Party, as there are no different voices reflected in the leader's report. Everyone praises and supports the report of the Party head with one voice. Moreover, all the candidates for Party posts are appointed by the Party head. Elections are just a superficial procedure without real significance.

However, the successor to the Party head appointed by former Chairman Mao Zedong was soon defeated by his opponents. Hua Guofeng was sitting in the last row of the chairmen's committee at the 17th Congress without any real political power. The real successor, whom Mao Zedong trusted, was defeated within one month after Mao's death. The ones chosen by Deng Xiaoping have become successive heads of the Party.

It appears that this practice of Deng's has been handed down to his followers and will continue to influence the operation of the CCP. As a result, Jiang Zemin will not abandon the right to choose the successor to Hu Jintao. Why is it like this?

Under the tradition of the Communist Party, after the death of a "great leader" the Party will usually turn to collective leadership, with a transition period in between. But if another figure with an iron hand appears, the phase of collective leadership will be delayed.

In the Soviet Union, after Vladimir Lenin died there were many powerful figures, and fierce struggles continued for a number of years till Joseph Stalin obtained absolute power. The real opportunity for collective leadership didn't appear until Stalin died. Usually, there will be a key figure within the group leadership, and his colleagues can restrict him or even drive him away from power. In practice, Georgy Malenkov and Nikita Khrushchev were both driven from power, but not Mikhail Gorbachev.

In China after Mao Zedong died, the "gang of four" was defeated, Hua Guofeng was forced to resign, and then Deng Xiaoping took control. Deng's dictatorship was not as strong as Stalin's. Deng considered leading the CCP to democracy, but was hesitant under the pressure of reality. Even compared to Khrushchev, he was much weaker, let alone compared to Gorbachev.

During the "1989 movement" people saw very clearly that the 85-year-old Chinese man (Deng Xiaoping) could not be compared to the 58-year-old man from the Soviet Union (Gorbachev). Therefore, after Deng died, group leadership could develop gradually. But during Jiang Zemin's presidency, due to Vice President Zeng Qinghong's strategies, the group leadership was not obvious. Hu Jintao appears to be of limited ability and his relationship with Zeng Qinghong is not as good as Jiang's, which creates more space for group leadership now.

Gorbachev was young and strong. He had new theoretical thinking and was bold enough to be politically open. He came to power and brought hope to the Soviet Union and its Communist Party. However, the Soviet Union was nearly 70 years old. It was very difficult for his reforms to achieve major breakthroughs under the restrictions of the conservatives -- giving up the communist monopoly on politics was already the limit. Therefore, the reforms could only be pushed by another, more radical political power. It is not an accident that Chinese conservatives and CCP bureaucrats are afraid of Gorbachev.

The CCP's conservative power is very strong and deep-rooted. Typically, it tries by all means to prevent any Gorbachev-like figure or activity from appearing. It also tries by all means to prevent different voices from emerging. Therefore, even Zhao Ziyang, former secretary general of the CCP, had to pay a high political price for this -- he was placed under house arrest until his death.

Although the CCP is inevitably marching toward collective leadership, faced with the fast development of the market economy it has put all its focus on the economy, to obtain wealth and benefits, while maintaining a cautious approach to politics to ensure its security. As a result, the Party has become corrupt and mediocre. It is very difficult for anyone who is ambitious, intelligent and capable of leading the Party to democracy to stand out from the crowd.

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(Guan Jian is the pen name of a commentator on China affairs for New Century Net. He is a former researcher at an institute for state economic reform. This article is edited and translated from the Chinese by UPI Asia Online; the original can be found at www.ncn.org. ©Copyright Guan Jian.)

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Political trend of the Communist Party Congress (Part II)

MU CHUANHENG

QINGDAO, Oct. 17

Two new terms -- "harmonious society" and "scientific approach to development" -- are being written into the Chinese Communist Party's constitution during the 17th Party Congress this week in Beijing. These are actually extensions of the old path, "socialism with Chinese characteristics." China, imprisoned in its red memory, has never been able to liberate its thoughts. The banner it carries forces it to walk that path.

At the CCP's 15th Congress 10 years ago, President Jiang Zemin pointed out that the banner carried by the Party is extremely important; the banner is its direction and image. Jiang proposed holding firm to the banner of Deng Xiaoping's theory. Later, at the 16th Party Congress in 2002, Jiang came up with the "ten firm persistences," which President Hu Jintao has simplified to the "four firm persistences."

After the 17th Party Congress, the CCP will begin taking small steps toward political reform in line with the thinking of Hu and Premier Wen Jiabao. However, this is based on the inheritance from Jiang. It is impossible that Hu's so-called "liberating thoughts" can deny Jiang Zemin, as the outside world speculates.

The relationship between Deng and Jiang and Hu and Wen is first of all one of inheritance. Secondly it is a creative renewal, or even a slight correction, of the old ideas. For example, compared with Deng and Jiang, Hu and Wen are emphasizing a harmonious society and certain values, which can be considered progress.

Nevertheless, since Hu and Wen proposed this objective, it has been proving difficult to achieve a harmonious society. On the contrary, social polarization and conflicts have worsened. And after the 17th Congress, "liberating thoughts" will not go beyond the current managerial mindset. It is therefore unlikely that a harmonious society can be achieved under the leadership of Hu and Wen.

Whether we speak of "socialism with Chinese characteristics" or "the preliminary stage of socialism," both were aimed at saving China through a capitalist market economy under the signboard of socialism. But these economic reforms did not come with political reforms, so they have allowed capitalists to exploit workers, who are not allowed to have unions. The result is an unsolvable theoretical self-contradiction.

A healthy society needs competition to maintain its vigor and fairness. Only when workers have the right to form unions can the greed of the capitalists be controlled, and can the benefits of both employers and employees be realized through negotiations.

The dialectic theory of social development points out that the progress of history is not simply decided by some power. Limited reforms are merely the thinking of the CCP. In the end, the direction, depth and rate of reform will be determined by the competition between all forces in society. No single person or group can control it.

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(Mu Chuanheng is a freelance writer and a former lawyer. He has published a number of books on trade negotiations and democratic politics. He is included in the book "World Celebrities (China Vol. 2) published in Hong Kong for his new theory of culture. This article is edited and translated from the Chinese by UPI Asia Online; the original can be found at www.ncn.org. ©Copyright Mu Chuanheng.)

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Political trend of the Communist Party Congress (Part I)

MU CHUANHENG

QINGDAO, Oct. 15

Up until just before the opening of the 17th National Congress of the Chinese Communist Party Monday, big arguments were taking place between conservative socialists, socialist economic reformists and Western capitalist reformists. The issue was what path the CCP should take -- to turn left (questioning the reforms), turn right (implementing greater reforms) or to remain in the middle (adopting limited reforms).

In addition, media inside and outside China have focused on what personnel changes will take place among the top Party leadership during the Congress. There have been all kinds of conjectures and rumors as to who will be the future president and the members of the standing committee of the Politburo.

The reason media pay so much attention to changes among the CCP leadership is that the top Party authority operates from within a black box, which increases the curiosity of the media. Second, it has been widely said that the battles between President Hu Jintao, former President Jiang Zemin and vice President Zeng Qinghong are very fierce. These are the battles between the Party League faction, the Shanghai gang and the "princelings," or children of senior Party leaders.

Third, many people believe that Chinese politics are controlled by a small number of people and that different leadership will produce different policies. Therefore, personnel changes among the top CCP leadership touch the nerve of the media. However, in my opinion, personnel changes will not have much substantial impact on China's political trends after the 17th Congress.

No matter who is elected to the Politburo, it will not change the confirmed path of the CCP. That path is determined by the nature and the collective interests of the Party -- the 17th Congress will remain in the middle, rejecting both left and right, and continue with limited reforms coated by socialism with Chinese characteristics.

From the collective view of the CCP, no matter who among the competing groups is elected to the Standing Committee, they will have no choice but to follow the confirmed direction. Even if the school of Mao Zedong took the top position, they could not reverse the vehicle of history. They could not put an end to the reforms of the market economy, or they would not be able to take a single step forward.

Mainstream Party members are worried that the extreme leftists will reverse the trend and destroy their future, or that the liberal rightists will destroy their legitimacy. So they are blocking both. Hu Jintao's speech at the Party School on June 25 set the tone for the 17th National Congress. That speech did not reflect Hu's own will; it represented the only choice based on the collective interests of the Party.

If the nature of the CCP remains unchanged, no matter who is in the top leadership, the Party will not deviate from protecting its collective interest. Therefore, generally speaking, personnel changes and the choice of a successor to Hu Jintao will not be key issues that can influence the whole situation.

Since the start of the reforms and opening the gate of China's economy, the gap between rich and poor has grown larger and larger; government corruption and the imbalance between supply and demand in terms of consumer products, education, medical care and social security are becoming more and more serious.

The media in China have made various remarks on these issues. Since the meeting of the National People's Congress and the Chinese People's Political Consultative Conference earlier this year, the extreme leftists have taken the position of opposing the reforms by attacking the problems they have created. Recently they issued a statement called the "ten thousand words" criticizing the reforms. The leftists have never been this active since Deng Xiaoping made his famous "southern tour" in 1992, which started the reform movement.

The CCP's 17th Congress has been subject to pressure from both the leftists and the rightists. But what matters most is the political path the Party decides to take after the congress.

Actually, the CCP's choice of political path has been obvious. In February this year, Premier Wen Jiabao published an article titled "The Historical Tasks in the Preliminary Stage of Socialism and Some Questions Regarding China's Foreign Policy." Moreover, on June 25, the eve of the 86th anniversary of the Chinese Communist Party, Hu Jinao gave a speech proposing the "four firm persistences." These two articles of Wen and Hu reject both left and right and set the political direction of the CCP's 17th Congress.

Hu Jintao used his speech to clearly respond to the conservative socialists. On the other hand, he denied democratic socialism and social democracy and would certainly not accept liberal democracy. "The People's Net" commented that the purpose of the speech was to unify the thinking of high-level CCP officials before the 17th Party Congress began, so that the Congress would be lead under the unified thought of the whole Party.

Among the "four firm persistences" outlined by Hu, "liberating one's thinking" is on top. Additionally, Wen Jiabao recently published a poem named "Looking Up at the Starry Sky", which also implied the need to liberate one's thinking. Then will there really be a movement of liberated thinking after the 17th Party Congress?

(To be continued)

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(Mu Chuanheng is a freelance writer and a former lawyer. He has published a number of books on trade negotiations and democratic politics. He is included in the book "World Celebrities (China Vol. 2) published in Hong Kong for his new theory of culture. This article is edited and translated from the Chinese by UPI Asia Online; the original can be found at www.ncn.org. ©Copyright Mu Chuanheng.)

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China's suicidal approach to international investment

LI XIAOLU

WASHINGTON, Oct. 11

China's national foreign exchange investment company, China Investment Corp., suffered huge losses even before it officially went into operation. This is the third significant event in Beijing to draw attention from both within and outside China recently. The other two events are the politicization of the 2008 Olympic Games and the political turbulence resulting from possible personnel changes to be determined at the upcoming 17th National Congress of the Chinese Communist Party.

China's foreign exchange reserves have reached US$1.3 trillion US dollars, ranking first in the world. In the midst of discussions within and outside China as to how to manage this national wealth, the Chinese government has been gradually moving toward foreign exchange management reform. This year the pace of reforms suddenly speeded up. In March, a decision was made to found the China Investment Corp., under the State Council, not the Ministry of Finance.

Initially this company had US$200 billion as its founding capital. The total investment for the Three Gorges Dam was US$22 billion. This means the company could have funded nine such dams. The Three Gorges project faced huge opposition at the outset, and we have already seen a number of adverse consequences. However, it went through 40 years of discussion and a great deal of research before it was finally started.

In a sense, the risk of investing China's foreign exchange reserves is much higher than that of building the Three Gorges Dam, with nearly ten times the funds. Yet surprisingly, this huge, high-risk investment was decided quickly without any careful research.

The Chinese government is separating its foreign exchange reserves into two parts, which are managed by two bodies. One is the China Securities Regulatory Commission headed by Hu Xiaolian, deputy governor of the People's Bank of China. The other is China Investment Corp. headed by Lou Jiwei, deputy secretary general of the State Council.

Both the People's Bank of China and the Ministry of Finance wanted to control China Investment Corp. Zhou Xiaochuan, governor of the central bank, and Jin Renqing, minister of the Ministry of Finance, fought for control of this entity, but neither succeeded. Recently, Jin was suddenly dismissed from his ministerial position. Although there have been many rumors about the reasons for his dismissal, the main reason was this struggle between conflicting interest groups.

The initial capital of US$200 billion was obtained by issuing over 1,500 billion domestic bonds and then purchasing U.S. dollars from China's central bank at the official yuan exchange rate. Considering its capital costs -- the cost of issuing the bonds plus the appreciation of the yuan -- the China Investment Corp. must maintain around a 10-percent return in order not to lose out. It is not easy for such a huge company to achieve this, considering the poor capability of the Chinese officials compared to international standards.

Chinese officials have been known for making decisions hastily and irresponsibly. But the foreign exchange reserves are the people's hard-earned money and should not be abused. In my opinion, this is not the right time for the Chinese government to get involved in investing its foreign exchange reserves. This could be suicidal for those who don't understand how international capital markets operate. Even for those who know the market, unless they are highly talented financial investors they will be controlled and bullied by others.

International financial markets are extremely volatile. After 100 years' development, in a macroeconomic environment where global capital circulates smoothly, the four large markets -- the stock market, debt market, foreign exchange market and futures market -- are closely linked. In an extremely complex pattern, financial derivatives, commodities, stocks, securities, interest rates, foreign exchange rates, various political and economic factors and even climate factors are all entwined. If one element is changed, the whole body will be influenced. The strongest investment banks, hedge funds and private capital groups run the overall market.

Take hedge funds for example. Experts know that hedge fund operators are the behind-the-scenes manipulators of global stocks, debts, foreign exchange and futures markets. The presumed headquarters of the U.S. stock market is Wall Street in New York, but the real headquarters is in Greenwich, Connecticut, where the hedge fund operators gather. The operation of hedge funds is extremely bold, crazy and secret. It is very difficult for outsiders to learn the inside story. Since the main practice of hedge funds is to use extremely complex derivatives for high returns, this also contains great risk.

Transactions in derivatives are the most unfamiliar and most difficult market behavior for China's financial circle. Chinese financial experts may understand futures trading, but not the inside story of how it works. In recent years, China's great defeats by international financial tycoons in copper and crude oil are significant lessons.

Apart from a well-established system, an important factor in the function of international capital markets is trained and talented people, and this is what China lacks most. At present there are no world-class economists in mainland China; there are not even second-class ones. This is due to the country's very late start in the study of finance and management and the lack of top talent to be found.

None of the Chinese officials in charge of the large foreign exchange reserves have received a complete standard education in finance or had any real experience in overseas financial markets. Financial management is not yet a real science in China. The officials managing China's huge funds, therefore, are less than beginners.

Among the 10 most influential Chinese economists selected by the Chinese media, six have received doctoral degrees from prestigious Western universities. Although the rest do not hold foreign doctorates, they also graduated from the most prestigious universities in China, and two of them have done research at Harvard University. From the aspect of talent, these economists are superior to those officials in charge of managing the nation's foreign exchange funds.

Nevertheless, these top Chinese economists still cannot compare to their colleagues overseas. In the field of international finance, the most intelligent people are traders and analysts in investment companies. Many economists and professors at universities and research institutes are secondary talents and are not capable of or not suited to such jobs. Although there are also outstanding economists and professors, generally speaking their ability is not as high as the traders and analysts. In the field of finance, the top salaries go to the traders, then the analysts, then the economists and professors. According to Professor Ding Xueliang from Hong Kong Chinese University, China's best-known economists would not even qualify as master's degree students in the top 50 economics departments of universities in the world.

Lou Jiwei and the like can be counted as the top financial talents among high-level Chinese officials. But compared to those powerful, intelligent, well-educated, experienced, and cruel competitors in the field of international stocks, securities and futures markets, they may prove dangerously weak.

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(Li Xiaolu is teaching at George Washington University in Washington, D.C. in the United States. He has also worked at Shanghai Jiaotong University in China, Meiji University in Japan, Harvard University, Asia Weekly and Ming Pao Daily in Hong Kong and Voice of America. This article is edited and translated from the Chinese by UPI Asia Online; the original can be found at www.ncn.org. ©Copyright Li Xiaolu.)

http://www.upiasiaonline.com/economics/2007/10/11/commentary_chinas_suicidal_approach_to_international_investment/

Reorienting the 17th Party Congress: Boosting Unity and Thwarting Taiwan

By Willy Lam

Nearly overnight, the focus of the 17th Chinese Communist Party (CCP) Congress has shifted from the debate regarding Chinese political and economic reform to the promotion of internal party unity and the combating of Taiwan’s proposed referendum. This change has come about due to increasing concerns raised by the party rank-and-file, intellectuals and ordinary citizens over dislocations in the economy, particularly regarding the runaway prices of commodities and services ranging from foodstuffs to housing and health costs. Across the Taiwan Strait, the two primary parties in Taiwan—both the independence-leaning Democratic Progressive Party (DPP) and the unification-leaning Kuomintang—have called for referendums, albeit with separate clauses, on Taiwan’s entrance into the UN. These perceived challenges to the authority of the Chinese leadership have apparently prompted the authorities to mothball discussions about liberalization—including the relatively innocuous agenda of “intra-party democracy”—for the foreseeable future. President Hu Jintao, well known for his cautiousness toward political reform, evidently fears that hoisting the flag of this controversial goal would engender further divisions within the party and country. From mid-September onwards, the speeches and statements given by Hu, Premier Wen Jiabao and the other members of the Chinese leadership have turned toward enhancing unity within the CCP. In a late September Politburo meeting, Hu surprised many officials when he cited the imperative of “comrades of the Politburo abiding by [the requirements of] the overall situation, closely working with and supporting each other, and upholding and developing the favorable conditions of unity and pro-activeness” (Xinhua, September 28). Hu further called for efforts toward buttressing “the party’s ideological construction and organizational construction.” His admonition seemed to indicate that there was a lack of unity even at the Politburo level. Moreover, “ideological construction and organizational construction” are standard CCP euphemisms for enforcing a “unity of thought” by means of marginalizing CCP elements deemed unwilling to toe the “central line.” That the party—and much of China—is divided over economic policy is evident from a “Politburo study session” conducted last week on ways to give a further push to the reform and open-door policy. While addressing the meeting, Hu did not explain why the leadership needed to reaffirm a plank that was first raised by late patriarch Deng Xiaoping nearly 30 years ago. “We must resolutely and unswervingly implement the basic national goal of the open-door policy,” Hu said. “We must expand both the breadth and depth of the policy of opening up to the world,” he added. “We must raise our ability in boosting [China’s] participation in economic globalization as well as maintaining national economic security.”In a commentary on the eve of the October 1 National Day, Xinhua alluded to “controversies” surrounding Deng’s reform and open-door policy over the past three decades. Xinhua cited “exacerbated contradictions” among disparate regions and social sectors due to wide gaps in levels of economic progress, lack of social justice as well as environmental degradation. The party mouthpiece pointed out, however, that “there is no cause for people outside China to worry that the country will experience retrogressions in the arena of the reform and open-door policy” (Xinhua, September 30). Foremost among scholars and even cadres who harbor doubts about the correct direction of these reforms are those belonging to the “New Left,” who have blasted both Hu and Wen for deviating from socialist ideals and for embracing unbridled capitalism. For example, in a widely cited article decrying the “nine major crimes” of socialism with Chinese characteristics, “neo-conservative” theorist Zhang Deqin slammed the leadership for practicing what he deemed “market Darwinism.” Zhang argued that the marriage of political power and capital has spawned unequal competition in the market, which has in turn resulted in the cruelest form of “the strong preying on the weak” (www.wyzxsx.com, April 28).Hu and Wen have become nervous about such criticisms, particularly in light of the apparent failure of Wen’s vaunted “macro-economic control and adjustment” policies. Despite repeatedly raising interest rates as well as mortgage charges, the overheated property market has shown no signs of losing steam. Even the official media has deplored how the “three big mountains”—unaffordable housing, together with sky-high education and medical costs—are crushing ordinary citizens. Partly as a result of the cyclical shortage of pork and other staple foodstuffs, the consumer price index increased by 6.5 percent in August. Western economists have estimated that real inflation could even be much higher. Mindful of the fact that it was hyperinflation in the mid-1980s that fuelled student protests—which culminated in the bloody June 4, 1989 Tiananmen crackdown—the authorities have essentially shelved all of the risky new initiatives so as to focus on nurturing internal unity and stability.Sources in Beijing who are familiar with the Hu Jintao Faction point out that in the interest of fostering “intra-party harmony”—deemed a prerequisite for party unity—Hu has made major compromises regarding top-level personnel arrangements to be endorsed at the Party Congress. The latest reports from Beijing state that apart from Hu’s protégé Li Keqiang, who is party secretary of northeastern Liaoning Province, Shanghai party boss Xi Jinping has emerged as a frontrunner to join the Politburo Standing Committee (PBSC) (Reuters September 25; Ming Pao, September 26). Li, 52, is a former first secretary of the Communist Youth League, which Hu had headed in the mid-1980s. Xi, 54, the son of the late liberal party elder Xi Zhongxun, has no factional affiliation with Hu. Nevertheless, the low-key highest-ranking official of China’s largest business center boasts an illustrious track record as a reformist administrator and is deemed more acceptable than Li to most CCP factions. In the case in which both Xi and Li ascend to the PBSC later this month, it is believed that the former will assume Hu’s mantle as party secretary in 2012 and the latter will succeed Wen as the premier soon afterwards.Apart from spreading the gospel of party unity and assembling a new leadership team that has cross-factional appeal, Hu is likely to use the Party Congress as a platform to issue a tough warning to Taipei. As the cabinet-level Taiwan Affairs Office (TAO) pointed out, the 17th Congress will hammer out a new set of “guiding principles, overall requirements and major tasks” toward Taiwan (Xinhua, September 26). This is despite the fact that it is unusual for a CCP congress, which usually handles internal party affairs, to emphasize cross-Straits relations.While the United Nations last month rejected Taiwan’s application to join the world body using the name “Taiwan”—as opposed to past attempts to join under the name “Republic of China”—President Chen Shui-bian as well as DPP presidential candidate Frank Hsieh and KMT candidate Ma Ying-jeou are committed to holding referendums on Taipei’s UN bid on the same day as the March presidential elections. Beijing’s TAO has reiterated that the DPP’s referendum, which it states is a first step toward changing the official name of the island from the “Republic of China” to “Taiwan,” constitutes a solid effort at claiming de jure independence. And from Beijing’s viewpoint, the Chinese leadership is authorized by China’s 2005 Anti-Secession Law to use “non-peaceful means” to torpedo the separatist bid.It is notable that in his National Day message, Premier Wen underscored the imperative of “countering and thwarting the separatist activities of ‘Taiwan independence’” in conjunction with “Taiwan compatriots” (Xinhua, September 30). More graphic and threatening language has been used by People’s Liberation Army generals while meeting foreign guests. It is significant that in the period leading to the 17th Party Congress, Hu, who also serves as the Chairman of the Central Military Commission, has promoted a host of officers with experience in the “frontlines” of the Nanjing Military Region (NMR), which is in charge of troops deployed in provinces opposite Taiwan such as Jiangsu, Zhejiang and Fujian. For example, the newly promoted Chief of the General Staff, General Chen Bingde, was the commander of the Nanjing MR throughout much of the 1990s. General Chen masterminded the war games and military exercises held opposite Taiwan in 1995 and 1996 in response to then-President Lee Teng-hui’s visit to the United States. Two others who have served in the Nanjing MR, Generals Wu Shengli and Ma Xiaotian, are also seen as rising stars. The two former heads of the Nanjing MR Air Force were recently named vice commander of the General Staff and commandant of the Academy of Military Sciences, respectively. Officers who have served in Fujian, the province closest to Taiwan, have also been elevated. Foremost among them is General Xu Qiliang, a former combat pilot based in Fujian who was last month appointed as the commander of the PLA Air Force. The newly named Political Commissar of the National Defense University, General Tong Shiping, also served in Fujian in the 1990s (Ming Pao, September 24).Analysts in Beijing state that given the imminence of the 2008 Summer Olympics and the Chinese leadership’s desire to project an image of China as a responsible stakeholder on the world stage, Hu is likely to emphasize “closely working together with the great majority of Taiwan compatriots for the goal of peaceful national reunification” during the 17th Party Congress. Yet given the mounting difficulties that Beijing encounters in maintaining domestic stability in the face of drastic socioeconomic changes, the Hu-Wen team may find it convenient to use Taiwan, along with other emotional, “patriotic” issues, to tighten the cohesiveness within the party and country. Since officers from the PLA and the People’s Armed Police will be allotted around 20 percent of the new seats in the Central Committee according to time-honored tradition, Hu’s saber rattling will also help him to consolidate his grip on both the party and the PLA’s leadership. Indeed, in light of his aversion to ideological liberalization, Hu, who is to rule China until at least 2012, does not seem overly disturbed by the fact that the sudden prominence accorded to the twin goals of cementing party unity and combating “separatism” has upstaged the liberal faction’s aspirations for political reform.
( http://www.jamestown.org/china_brief/article.php?articleid=2373694)

Echoes of Tiananmen Square

By Yang Jianli

Sunday, September 30, 2007

In the early hours of June 4, 1989, I was on Chang'an Street, just west of Tiananmen Square in Beijing, when I saw Chinese soldiers open fire and kill many of my fellow protesters. I barely escaped the same fate. The horror of that day is seared in my mind like it was yesterday.

In recent days, my memories of Tiananmen have come rushing back as I have watched the mass demonstrations in Burma and the junta's bloody crackdown. After decades of military dictatorship, hundreds of thousands of the people of Burma -- a diverse outpouring of Buddhist monks, democracy activists and ordinary civilians -- are standing up to confront the country's brutal regime.

All of us in the Chinese democracy movement stand in solidarity with the Burmese people, who are engaged in a life-or-death struggle to free their country from years of oppression and decay. Everything is at stake for the Burmese, but the outcome in Burma will also have a major impact on our struggle in China.

The Burmese junta has chosen to face the uprising with violence because it is losing its grip on power and because it is convinced that China will come to its aid in the U.N. Security Council and suppress any meaningful international response. So far, those calculations have proved correct. Last week, China, together with Russia, prevented the Security Council from even condemning the violence inflicted on the protesters. In January, the two countries had vetoed a non-punitive Security Council resolution urging national reconciliation.

China has a parasitic relationship with Burma. Beijing sucks out Burma's natural resources -- especially oil, gas and timber -- at heavily discounted prices, which it obtains because so few countries are willing to do business with a regime that manages its own economy so poorly and that has such a terrible human rights record. China views the junta's preservation as in its own interest, to ensure that competition for those resources remains minimal. To this end, China is the principal arms exporter to Burma, providing 90 percent of its weapons. Without $1.6 billion in past military assistance from China, Burma would not have been able to create a 400,000-member army, the second-largest in Southeast Asia, behind only Vietnam. And this Chinese support is provided despite the quiet complaints of Yunnan province officials about the massive outflow of drugs and HIV-AIDS from Burma into China.

While China's initial response to the protests has been to defend the junta vigorously, it is unclear how long that support will last. The more that the international community highlights the blood on China's hands -- for arming the junta and steadfastly defending the regime's tactics, which include systematic rape and murder -- the less likely it is that Beijing will stand firm. Particularly when combined with activists' efforts to highlight China's role in funding the Sudanese regime and thus the atrocities in Darfur, China's culpability for the violence in Burma will only reinforce attempts to brand the 2008 Olympics in Beijing the "Genocide Games."
There is a bright side to China's communist government being driven not by values but by pragmatism. Not only does its support for the Burmese junta contradict the image of a responsible power that China has tried to project in recent years, but if the junta falls, Beijing will want to be on good terms with a new democratic government lest it try to cancel or renegotiate China's massive contracts for natural resources. While Beijing will hold on as long as preserving the junta seems possible, it will also abandon the Burmese generals the moment preserving its own interests requires doing so.

The stakes in Burma are huge. The Burmese people peacefully elected a democratic government years ago, and the junta has not allowed those leaders to take office. The U.N. Security Council needs to demand the cessation of violence and a return to a meaningful, U.N.-supported dialogue between the junta, the National League for Democracy and ethnic groups. Such a dialogue must have benchmarks to measure progress and must result in the restoration of democracy to Burma. Until the Security Council acts, the United States and other freedom-loving countries should provide China with a stark choice: either use its leverage on Burma to ease a democratic transition or be held publicly responsible for its failure to do so.
Yang Jianli is president of the Foundation for China in the 21st Century. He was released last month after completing a five-year prison term in China, where he was sentenced for attempting to observe labor unrest in 2002.
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Washington Post

Chinese-Uighur culture clash in Sweden

CHEN SHIZHONG

ESKILSTUNA, Oct. 1

China's Xinjiang Song and Dance Company gave two wonderful performances in Eskilstuna city in Sweden on Sept. 8th and 9th. At first glance, this kind of cultural performance would appear completely apolitical. However, at the same time a full-page editorial appeared in the city's biggest newspaper criticizing the Eskilstuna Cultural Bureau for allowing the event. The article accused city bureaucrats of fawning on the autocratic Chinese authorities. Obviously, the editorial viewed the performance as political.

The newspaper pointed out that the art troupe came from Xinjiang Province in northwest China, home to the Uighur minority group, which is oppressed by the Chinese authorities. Uighur organizations outside China had warned that Beijing would use such performances as a propaganda tool, to create a happy image of the Xinjiang people under the rule of the Chinese government.

Cultural exchanges are a normal means of international interaction. However, the Chinese authorities use them as an opportunity to disseminate propaganda. As always, staff from the Chinese Embassy handed out all kinds of brochures, books and CDs to the audiences, to give the impression that the people of Xinjiang are living a happy life without disputes or conflicts.

At the same time, when a group of Uighurs living in Sweden tried to hand out their own materials, they were stopped by the embassy staff. Even the local police came to block their activities. These Uighurs were not even allowed to talk to the members of the performing team.

What did the city government do regarding this protest? Did it try to correct the behavior of the staff from the Chinese Embassy? Did it apologize to the Uighur activists? Or maybe it expressed apologies to the embassy staff, who were offended by the freedom of speech in Sweden?

China is an important country to Sweden. It is beneficial for the two countries to exchange opinions and carry out dialogue with each other. Commercial and cultural cooperation is conducive to future political cooperation. However, Swedish officials need to be more aware of what is going on behind the scenes when they participate in these exchange programs.

China, which will host the Olympic Games next year, is making great effort to disseminate a positive picture of its "open" society. Exporting culture to other countries is part of China's propaganda strategy. Therefore, when China brings entertainment to Sweden, the Swedish government should not simply bend to the requests of the Chinese authorities. The Swedish organizers have the moral responsibility to respect diverse opinions rather than standing with the Chinese government.

Unfortunately, the city government of Eskilstuna chose to let the Chinese authorities express their views freely, while blocking the supporters of democracy at the door. This is a bad precedent for future cultural exchange between China and Sweden.
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(Professor Chen Shizhong is a retired professor from Harbin University in northeast China. He has received honors for his teaching, research and social activities. He is now a freelance writer focusing on China affairs. This article is edited and translated from the Chinese by UPI Asia Online; the original can be found at www.ncn.org. ©Copyright Chen Shizhong.)